Tokyo Property Booming But Regions Remain Dormant

Property prices in Tokyo, Osaka and Nagoya rose for the first time in six years, but for most other parts of the country, prices continued to fall in a sign of the patchy recovery sparked by the government’s pro-growth policies.

Bloomberg News

The property market in Tokyo and other big cities in Japan is heating up, fueled by the government’s pro-growth Abenomics policies, but real-estate prices elsewhere in the nation are continuing to languish.

Land prices in Tokyo, Osaka and Nagoya rose for the first time in six years, according to the latest government data for 2013, but another year of declines in most areas outside those three cities is a cause for concern.

Analysts say the uneven effect of Mr. Abe’s growth-oriented economic policies could pose a challenge for his goal of overcoming the nation’s deflationary malaise.

The latest nationwide survey shows signs of life in the property market after two decades of almost constant falls since the collapse of Japan’s asset bubble in 1990. Property gains have been led by places like Tokyo’s upscale Ginza shopping district and the area around the train station in the central Japanese city of Nagoya, close to the home of auto giant Toyota Motor Corp.

Property prices in the major cities have been helped by the Bank of Japan’s monetary easing and growing confidence in the economy.

Some localized pockets of price rises were also seen outside the main cities.

In the provincial city of Kanazawa on the northern coast of Japan, some residential areas close to the city center saw property increases last year. Shinkansen bullet-train services are expected to start in the city in 2015, helping boost interest in the area, though prices continued to fall at less convenient locations from the city center.

“One major redevelopment project or something similar can provide a spark, but if there isn’t anything like that then the gap between areas is likely to widen further, ” said Hiroshi Okubo, head of research for Japan at CBRE, a U.S. commercial real estate company.

Takashi Ishizawa, chief real-estate analyst at Mizuho Securities, also cautioned against reading too much into the recent upbeat results.

“In some regional areas where the population is declining, the pace of land price falls could slow, but the chance of prices turning higher is quite slim,” said Mr. Ishizawa.

Nationwide land prices in Japan have fallen every year except two since the asset bubble burst. The government survey showed that prices fell for a sixth straight year in 2013 – by 0.6%.

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